IMF pushes Ukraine to ‘voluntarily commit suicide’

Western support will allow more IMF and European lending to prop the Ukrainian currency so the Ukrainian oligarchs can move their money safely to British and US banks, economist and author Michael Hudson told RT’s Truthseeker.

RT:Could you
summarize for us the tried and tested steps that will lead from
IMF loans, to Ukraine's best assets ending up in private Western
hands - the IMF's 'knee-breaker' role as you memorably described
it as?

Michael Hudson: The basic principle to bear in
mind is that finance today is war by non-military means. The aim
of getting a country in debt is to obtain its economic surplus,
ending up with its property. The main property to obtain is that
which can produce exports and generate foreign exchange. For
Ukraine, this means mainly the Eastern manufacturing and mining
companies, which presently are held in the hands of the
oligarchs. For foreign investors, the problem is how to transfer
these assets and their revenue into foreign hands – in an economy
whose international payments are in chronic deficit as a result
of the failed post-1991 restructuring. That is where the IMF
comes in.

The IMF was not set up to finance domestic government budget
deficits. Its loans are earmarked to pay foreign creditors,
mainly to maintain a country’s exchange rate. The effect usually
is to subsidize flight capital out of the country – at a high
exchange rate rather than depositors and creditors getting fewer
dollars or euro. In Ukraine’s case, foreign creditors would
include Gazprom, which already has been paid something. The IMF
transfers a credit to its “Ukraine account,” which then
pays foreign creditors. The money never really gets to Ukraine or
to other IMF borrowers. It is paid to the accounts of foreigners,
including foreign government creditors, as in IMF loans to
Greece. Such loans come with “conditionalities” that
impose austerity. This in turn drives the economy even further
into debt – forcing the government to tighten the budget even
more, run even smaller budget deficits and sell off public
assets.

RT: Can Ukraine expect the so-called 'IMF
effect' of 1 in 5 of the impoverished population emigrating
to work abroad, and what consequence could this have on a country
to lose its brightest minds?

MH: Ukraine already draws in foreign emigrants’
remittances equal to about 4% of its GDP. (About $10 billion a
year.) Most of this money comes from Russia, the rest from
Western Europe. The effect of IMF austerity plans is to drive
more Ukrainians to emigrate in search of work. They will send
some of their earnings back to their families, strengthening the
Ukrainian currency vis-à-vis the ruble and euro.

RT:How are the IMF's tools in reality
“weapons of mass destruction” as you quoted it?

MH: Lower budget deficits cause even deeper
austerity and unemployment. The result is a downward economic
spiral. Lower incomes mean lower tax revenues. So governments are
told to balance their budgets by selling off public assets –
mainly natural monopolies whose buyers can raise excess prices to
extract economic rent. The effect is to turn the economy into a
renting “tollbooth economy.” Hitherto free public roads
are turned into toll roads, and other transportation, water and
sewer systems also are privatized. This raises the cost of
living, and hence the cost of labor – while overall wage levels
are squeezed by the financial austerity that shrinks markets and
raises unemployment.

RT:The IMF's perhaps also a weapon of mass
destruction in a more literal sense. The organization has
publicly threatened and blackmailed Ukraine that it will
're-design' its aid package, unless Kiev goes to war on fellow
Ukrainians in the East of the country and stops them protesting.
Does that not make it now literally a criminal accomplice or
instigator of war and murder?

MH: The IMF’s “conditionality” is that
it “pacify” the East. Pacification may occur violently
in today’s Orwellian rhetoric. The only way in which actual
political and economic peace can be achieved is by a loose
federalization of Ukraine, to make each region independent of the
kleptocrats in Kiev, who are appointed mainly from the West.

As for accusations of criminality, this always depends on who is
the prosecutor, and what is the court! No country has yet
prosecuted the IMF. All that voters can do is reject governments
submitting to IMF conditionalities. Many voters who are able will
“vote with their feet” and simply leave the sinking
economy. So the IMF’s defense is that Ukraine and other clients
are voluntarily committing suicide rather than being murdered.
Austerity is ultimately a policy – nobody is holding gun to their
head, except when political leaders are assassinated as in Chile
in 1974 under Pinochet with the US Government behind it. In this
sense, Ukraine today is a replay of Chile four decades ago.

RT:Everyone knows austerity's effects on
Greece and elsewhere; polls show most Ukrainians don't want it;
even the IMF itself now admits austerity doesn't work. Why will
Ukraine's leaders allow it to happen, are they guaranteed a cushy
job in the West when they've voted out or something?

MH: Ukraine’s leaders are mainly kleptocrats.
Their aim is not to help the country, but to help consolidate
their own power. George Soros has written that their best way to
do this is to find Western partners. This will provide US and
European backing for the kleptocrats tightening their hold on the
economy. Western support will provide more IMF and European
lending to support the currency so that the Ukrainian oligarchs
can move their money safely to the West, to British banks and US
banks.

RT:Do you think that the EU isn't stupid
enough to make Ukraine a full member, so under the one-sided
association agreement, member states will just strip the country
of its best assets, and use its workers as near slave labor, with
Ukraine's 91 US cents an hour minimum wage?

MH: The EU hardly can really make Ukraine a
member. One reason is that a key policy underlying French and
German creation of the original Common Market in 1957 was the
Common Agricultural Policy (CAP). Ukraine has rich Western land,
and that part of the country is largely still rural. Foreign
investors would like to buy it out and “re-feudalize”
it, creating large business farms. But the EU is unlikely to
provide the subsidies that financed mechanization and capital
investment in Western European agriculture.

The EU does not need to formally integrate with Ukraine to
benefit from its inexpensive labor. Wrecking the economy
Greek-style or Irish-style or Latvian-style is sufficient to send
its workers to the West. And the most mobile traditionally are
the best educated youth in their 20s, able to speak foreign
languages and with skills in demand in the West.

RT:You noted Ukraine 'must have asked the
US first' before blowing up that gas pipeline. Do you think NATO
will support anything even terrorism to make Russian gas seem
less reliable, especially while US fracking giants currently are
waging a big PR campaign in Europe.

MH: The US has pressed Europe to make its own
economy much more high-cost and to rely on US gas exports mainly
in order to deprive Russia of foreign exchange. The NATO
rationale is essentially that which Prime Minister Arseniy
Yatsenyuk tweeted on Monday, June 16: Ukraine “won’t continue
subsidizing Gazprom [to the tune of] $5 billion annually, so that
Russia can arm itself against us [with this money].”

The US position today is what it was in 1991: Without
manufacturing, Russia cannot be a serious military power to
defend itself. And without purchasing foreign technology and
without large state subsidy – as US and European governments
provide their own economies – Russia cannot create a
manufacturing economy. So NATO is trying to prevent Russia from
earning enough money to modernize its economy, on the principle
that any industrial power is potentially military, and any
military power my potentially be used to achieve political
independence from the US sphere.

RT:Anything else you would like to
add?

MH: What is at issue is whether economies
throughout the world will let financial leverage dismantle the
power of elected governments, and hence of democracy. Governments
are sovereign. No government actually needs to pay foreign debts
or submit to policies that negate the three definitions of a
state: to create its own money, to levy taxes, and to declare
war.

At issue is who shall rule the world: the emerging 1% as a
financial oligarchy, or elected governments. The two sets of aims
are antithetical: rising living standards and national
independence, or a renting economy, austerity and international
dependency.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.